Wyatt Research Week in Review: Sept. 27-Oct. 3

Well, that was fast.
On Monday, Royal Dutch Shell PLC (NYSE: RDS-A) announced that it’s abandoning plans to drill for deepwater oil in the icy Arctic waters of the Chukchi Sea.
It was a risky – some would say foolhardy – endeavor that began during the peak of summer. Now it’s over almost as soon as it began, leaving many Shell shareholders feeling as if they were left out in the cold.
“Shell continues to see important exploration potential in the basin, and the area is likely to ultimately be of strategic importance,” Marvin Odum, director of Shell’s Upstream Americas division stated in a press release. “However,” he added, “this is a clearly disappointing exploration outcome for this part of the basin.”
What was earmarked as a $7 billion project has now been scrapped after Shell found only a whiff of oil in an area of the Chukchi where it anticipated an underseas boom.
It’s the worst kind of déjà vu for stock market explorers who hitched a ride on Shell’s trip north to Alaska in 2012. Not only did the crew not strike black gold in the frigid Beaufort Sea during that ill-fated mission, but during the homeward voyage of shame Shell’s massive Kulluk drillship ran aground in the Gulf of Alaska, costing the company billions.
The obvious question with 20/20 hindsight is why take the risk? The world isn’t exactly lacking for oil these days, from the frantic frackers of the American Midwest to the pump-happy Saudis.
But perhaps that’s exactly the reason. With oil prices stuck in neutral from the global oil glut, Shell saw an opportunity to stake its claim in the world’s last untapped oil frontier. It didn’t work, but at least Shell folded its hand before borrowing against the house on a long-shot ace in the hole.
So for investors concerned that Shell’s latest dividend yield of 7.5% might be in jeopardy, look to the viability of the integrated oil major’s other operations for your answer. The failed Arctic excursion is unlikely to be the catalyst that dries up Shell’s income well.
Here are some of my favorite Wyatt Investment Research articles from the week:
Suncor Deal Shows Divergent Views on Canadian Oil Sands – With its purchase of an additional 10% stake in the Fort Hills project in Alberta for CA$310 million, Warren Buffett favorite Suncor Energy (NYSE: SU) is upping the ante on its Canadian oil sands bet. The good news for Suncor is that 90% of the Fort Hills engineering is complete, as is 40% of the construction. The first oil is expected to flow in the fourth quarter of 2017. But Suncor can’t control everything, and the company will face challenges from Alberta’s politicians, as well as the Saudis trying to knock out Canadian energy.
The Best Utility Stock to Buy for Dividends – Utilities are highly recession-resistant businesses. After all, people always need to keep the lights on, even when the economy isn’t doing well. The best utility stock for income investors doesn’t have the highest yield in the sector, but it grew earnings per share by 3% last year, and adjusted EPS is up 11% through the first six months of 2015.
Albertsons IPO: Will Investors Be in for Something Fresh? – Less than a year after merging Safeway into privately owned Albertsons, Cerberus Capital Management is pitching an Albertsons IPO to the investing public. It’s unclear how many shares and at what price the investment banks will underwrite the initial public offering, but Cerberus has announced that it wants to raise $1.84 billion.
The Real Winner From the Bud-Miller Merger – Anheuser-Busch InBev (NYSE: BUD) is making a play for SABMiller (OTC: SBMRY), offering a near 35% premium to buy the company. The proposed transaction would be Anheuser-Busch’s largest acquisition ever. But the biggest imbiber of profits from the proposed acquisition could be a rival North American beer company which has a strong stock buyback plan in place and is shifting toward more craft beer offerings.
Maximize Your Portfolio Potential With Mini Options – Mini options trade exactly the same way as standard options, but because they are new, they are available only on a few underlying stocks and ETFs. But for investors who don’t want to own 100 shares of an underlying security, mini options can be a great way to dip one’s toes in the options investing waters.
These Dividend Aristocrats Should Boost Their Payouts in October – The S&P 500 Dividend Aristocrats are a select group of companies that have increased their dividends for at least 25 consecutive years. Two Dividend Aristocrats that maintain industry-leading positions are primed to hike their dividend payments this month. One of the companies, which has increased its payout for 42 years running, increased its dividend by a robust 22% last year.
Valeant Stock: Do You Dare Catch the Falling Knife? – Under pressure from the House Committee on Oversight and Government Reform regarding drug price increases, Valeant Pharmaceuticals International (NYSE: VRX) stock lost 16.5% on Monday. Should investors buy the dip on the serial pharma acquirer beloved by billionaire hedge fund manager Bill Ackman?
Canada’s Economy Trying to Dig Out From Commodities Hole – Thanks to the continuing drop in commodity prices, Canada’s economy is sputtering. In fact, Canada is in its first recession since 2008. In the first quarter of 2015, the economy shrank 0.8%. The second-quarter gross domestic product shrank by 0.5%. However, not everything is bad, and certain stocks are outperforming.
Have a great weekend!